Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● We recently met HDFC Life management. It highlighted the
significant changes it has undertaken in its business model post
the introduction of new regulations. Benefits of these are visible in
improved market share, drop in costs and margin recovery.
● HDFC Life is now among the Top 3 private insurers, even as
overall industry sales continue to be depressed. It was the fastest
growing player in 2H11 new business growth (2% for HDFC Life
vs de-growth of 41% for the industry). Management is confident of
clocking 10-15% growth in new premiums even in FY12.
● Post new regulations, new business margins dropped sharply to
10% in 2H11 (from 28% in 1H). However, with the reduction in
costs & commission, improved persistency (80%+) and growing
top-line, management expects these to recover to 15% in FY12.
● With market share gains, HDFC Life is relatively well placed in the
current environment. We estimate the life insurance company at
US$3.0 bn (10% of HDFC’s stock price – 74% stake) based on
appraisal value (FY12 EV of US$1.1 bn and 12x FY12E new
business profits).
Business model re-jigged post new regulations
HDFC Life has focussed on rationalising costs, commission rates and
agent force over the past six months to manage the challenge of new
regulations on unit-linked products. It has also increased reliance on
Bancassurance, which is now the key channel for them, with HDFC
Bank contributing over 65% of volumes; but management sees little
risk to its market share even as regulator considers allowing banks to
distribute products of multiple life insurers. It has been the fastest
growing private player, and in FY11, its market share increased to
13% within the private sector from 9% in FY10.
HDFC Life’s reported embedded value at Rs42 bn (US$0.9 bn) as of
Mar-11. Capital requirements are likely to be low (Rs1.2 bn in FY12;
total capital infused till date is Rs21.6 bn). While the regulator has
recently put out the IPO guidelines for the insurance companies, an
increase in FDI limit is still needed before the company undertakes an
IPO.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● We recently met HDFC Life management. It highlighted the
significant changes it has undertaken in its business model post
the introduction of new regulations. Benefits of these are visible in
improved market share, drop in costs and margin recovery.
● HDFC Life is now among the Top 3 private insurers, even as
overall industry sales continue to be depressed. It was the fastest
growing player in 2H11 new business growth (2% for HDFC Life
vs de-growth of 41% for the industry). Management is confident of
clocking 10-15% growth in new premiums even in FY12.
● Post new regulations, new business margins dropped sharply to
10% in 2H11 (from 28% in 1H). However, with the reduction in
costs & commission, improved persistency (80%+) and growing
top-line, management expects these to recover to 15% in FY12.
● With market share gains, HDFC Life is relatively well placed in the
current environment. We estimate the life insurance company at
US$3.0 bn (10% of HDFC’s stock price – 74% stake) based on
appraisal value (FY12 EV of US$1.1 bn and 12x FY12E new
business profits).
Business model re-jigged post new regulations
HDFC Life has focussed on rationalising costs, commission rates and
agent force over the past six months to manage the challenge of new
regulations on unit-linked products. It has also increased reliance on
Bancassurance, which is now the key channel for them, with HDFC
Bank contributing over 65% of volumes; but management sees little
risk to its market share even as regulator considers allowing banks to
distribute products of multiple life insurers. It has been the fastest
growing private player, and in FY11, its market share increased to
13% within the private sector from 9% in FY10.
HDFC Life’s reported embedded value at Rs42 bn (US$0.9 bn) as of
Mar-11. Capital requirements are likely to be low (Rs1.2 bn in FY12;
total capital infused till date is Rs21.6 bn). While the regulator has
recently put out the IPO guidelines for the insurance companies, an
increase in FDI limit is still needed before the company undertakes an
IPO.
No comments:
Post a Comment